British Anti-Cartel Regulators Target Government IT

Are HP, Accenture stifling competition -- and the economy -- by supplying most of the British government's IT needs? Office of Fair Trading determined to find out.

Are a handful of IT companies, some of them big U.S. names, hogging most of the government business in Britain?

About 20 software and IT suppliers earn £10.4 billion ($15.5 billion) a year in revenue from the state by supplying information and communications technology (ICT) goods and services. At the pinnacle: big U.S. tech firms such as HP and Accenture, as well as Europe's own Capgemini.

Now the British body tasked with ensuring fair competition in industry, the Office of Fair Trading (OFT), says it is fed up with the "oligopoly," whereby just a few companies control the IT at huge ministries such as tax collecting body HMRC and the Department of Work and Pensions, and is opening an inquiry into market rigging.

The fact that more and more of Whitehall's IT is in the hands of a few, well-compensated suppliers is not news. Ever since outsourcing was aggressively introduced by the Thatcher government in the early 1980s -- for IT as well as other parts of central government back office activities -- big suppliers have become adept at grabbing increasingly larger shares of the pie for themselves.
Government officials had already begun to push back by asking ministries to consider the G-Cloud first. It also encourages ministries to tap small and midsize businesses (SMBs) as often as possible to ensure a diversified market.

The OFT's call for information into the supply of IT goods and services
to the country's public sector moves up the debate. The body is asking suppliers and purchasers to "get in touch" with it about their experiences to help it clarify the structure of the sector. It wants, for example, the number of suppliers and their relative market share, whether there are barriers to entry that make it difficult for smaller businesses to compete, and whether any suppliers seek to limit the interoperability and use of competing systems with their own. It also wants to know whether there are "high barriers" to switching suppliers, such as costs of transferring and restrictive license agreements, that limit customers' freedom of movement.

The OFT also is interested in customer behavior, wanting to know if decades of IT outsourcing has resulted in a "high level of dependence" on suppliers' expertise that could undermine the ability of British public bodies to achieve good value for money over time. Healthy competition in any market, it notes, drives down costs, increases efficiency and promotes innovation, while a lack of competition can hinder productivity and economic growth.

"Information and communication technology is a crucial part of any modern economy and is key to improving productivity in public services as well as businesses," said OFT CEO Clive Maxwell. "Given the vital role that this technology plays in the delivery of public services and the cost to the taxpayer, [we] believe it is important to explore whether there are any restrictions on competition.”

Maxwell added that his team wants to hear from both industry suppliers and public sector users about how competition in the market works, any problems that they have experienced, and "how it could be made to work better."

This article is drivel. First, nowhere in the OFT's announcement does it either claim that there is an "Oligopoly" in the market or indicate that it is "fed up" with it.

Second, in contrast to the statement in the article that "big suppliers have become adept at grabbing increasingly larger shares of the pie for themselves", the reality is that over the last ten years or so the market has been getting more and more competitive as new entrants have come in and the market shares once enjoyed by some of the big players have diminished.

It's precisely because supposedly legitimate publications like Information Week publish ill-informed and inaccurate crap like this that the myth that there's an oligopoly at play has been allowed to perpetuate. Shoddy and lazy journalism.

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